Once a potential resident has decided to move into an aged care facility, they may need to decide whether to sell the family home. It is a common myth that all care residents MUST sell their home to pay accommodation costs associated with their aged care home. A potential resident can choose to sell or to keep their home if they prefer – depending upon their individual circumstances. Each option affects their aged care fees in different ways. Aged Care Decisions recommends enlisting the help of an aged care financial adviser to help make this important decision.
Permanent residential aged care fee structure
The aged care fee structure can be confusing because there are multiple fees that are each calculated differently. This can make it difficult for potential aged care residents to figure out whether selling or keeping their home is better financially. By understanding how it works, potential residents can make an informed choice.
The main elements of the aged care fee structure include:
- Accommodation payment
- Basic daily fee
- Means-tested care fee
- Extra service fee / Additional services fee
What is the accommodation payment?
Each resident MAY be required to pay an accommodation fee for their room. If paid in full, this is referred to as a Refundable Accommodation Deposit (RAD). The average RAD in Australia is approximately $450,000, and it is refundable after the resident leaves the aged care home.
Residents can also choose to pay a daily accommodation payment (DAP) instead, which is similar to a rental payment and is not refundable. Alternatively, residents can pay via a combination of both RAD and DAP.
In this article, we are only looking at how your house can affect your overall payments. You can learn more about the DAP here.
Many aged care residents opt to sell their home to cover the Accommodation Payment upfront However, selling their home can also affect other aged care fees, so it’s wise to check them first.
What is the basic daily fee?
Every aged care resident pays a basic daily fee directly to their aged care facility towards the cost of their daily care. The amount changes twice a year and is currently $54.69 per day. This fee is not affected by a resident’s assets or income because it is not means tested.
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What is the means-tested care fee?
Residents who can afford to pay more towards their care pay the means-tested care fee in addition to the basic daily fee. This amount is determined by a resident’s income and assets and therefore may be impacted depending on whether a potential resident sells or keeps their home.
Selling the home
If a resident sells their house, the money they receive after all outgoings are paid is counted as an asset. This in turn raises a potential resident’s means-tested fee because the value of their total assets is higher.
Keeping the home
If a resident keeps their home, only a portion of its value is counted as an asset when calculating the means-tested care fee. This portion is referred to as the home exemption cap. Currently, the value of the home counted as an asset is capped at $178,839.20.
If you would like to check whether you are eligible to pay a means-tested care fee and how much this might be, you can use this Fees Estimator.
What is the extra service fee / Additional services fee?
If a resident opts for an extra service room or any extra services the provider offers, they may pay either an extra services fee / additional service fee. These are not subsidised by the government, so they will pay the full cost.
Summary of aged care fees
To recap, depending on a potential resident’s financial situation, they may have to pay:
- The total cost of their RAD
- A daily care fee of $54.69
- A means-tested care fee
- Fees for any extras they book
If my spouse is not moving to residential aged care and I am, would I be required to sell my home?
The way a resident’s home affects their aged care fees differs depending on their situation. If a resident’s spouse continues to live in their home, he or she may be counted as a protected person. A family home is not counted as an asset while a protected person still lives there.
However, if a resident’s spouse later moves into the aged care home too, the home exemption cap may apply. After two years, 50% of the house’s value is counted as an asset for each of them.
Should I sell my house or keep it when entering aged care?
As you can see, aged care fees change depending on what each potential resident decides to do with their house, income and assets. There are many factors to consider, including how the value of a resident’s assets affects their aged care pension. The RAD is not included in the means test for the aged care pension but it is included in the means test for a resident’s aged care fees. Potential residents should account for any change to their pension in their calculations.
Everyone’s situation is different, so there is no one option that is better than the other. If you are unsure which decision is best for you and your family, contact an aged care financial adviser. Aged Care Decisions is not able to give financial advice. If you have more general questions about aged care fees or are looking for aged care options, Aged Care Decisions can help. Call us on 1300 775 870 or fill out this form and one of our aged care specialists will contact you.